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Budgeting for the Next Generation

In our series, Budgeting for the Next Generation,[*]we review federal programs for children and assess how they fare in the federal budget and the budget process.

Papers in this series show that:

Many federal programs for children play an important role in helping ensure their well-being, giving them the skills and support they need to succeed later in life, and supporting long-term economic growth.

Federal spending on children comprises a relatively small share of the budget despite the needs of the population and the economic benefits of investing in future generations.

Children’s share of the federal budget is projected to shrink over time as rising adult entitlements and debt service payments crowd out this spending.

The current budget process and concepts bias federal spending away from children. Whereas most programs for the elderly are on autopilot and feature automatic growth, most programs for children must be periodically reauthorized through legislation and have little or no automatic growth.

Rising levels of debt will put an additional burden on children today, as well as future generations of children.

We rely heavily on data generated by the Kids’ Share project at the Urban Institute, which releases an excellent and comprehensive report on children and the budget every year.

In addition to the papers on children and the federal budget, CRFB has also published related products and will continue to do so in the coming months. Below are links to each of these publications, which will also be updated as new analyses are published.

Papers:

Our first paper in the series examines the importance of federal programs for children and their composition, how the budget process puts children’s programs at a disadvantage, and how rising debt will burden current and future children. While in the past most of the federal budget was allocated annually by Congress through the appropriations process and encouraged policymakers to review spending programs on a regular basis, much of the budget today is on autopilot through mandatory spending that is heavily skewed toward the elderly. Programs for children are designed to ensure they are housed, fed, educated, and provided with basic services to survive and become productive adults, but spending on programs for children makes up a small share of the federal budget. In addition, the poverty rate for children in the United States is nearly twice the poverty rate for the elderly. While most programs for the elderly feature automatic growth, most programs for children must be periodically reauthorized through legislation and have little or no automatic growth. Budgetary decisions over the past decade have also disadvantaged programs for younger Americans, while high and rising levels of federal debt will leave a massive future burden on today’s children to service and reduce that debt.

Our second paper shows that less than one-tenth of federal spending and support goes to children, that spending and support for children grew significantly between 1960 and 2010, that federal support for children has fallen since 2010 and will continue to do so, and that interest costs will exceeding spending on children by 2020 and support for children by 2021. The federal government spent nearly $3.9 trillion in fiscal year 2016; only $377 billion, or about 9.8 percent of the federal budget, went to children. During the half-century prior to 2010, federal spending and tax breaks for children grew substantially, with total federal budgetary support for children rising from 1.8 percent of gross domestic product (GDP) in 1960 to 3.1 percent of GDP in 2010. Federal support for children peaked in 2010 and has been on a downward trend ever since; recent legislation will only temporarily halt this trend, as total support for children is projected to fall to 2.2 percent of GDP by 2028. As debt rises over the next decade and interest costs accelerate, the federal government will soon spend more money servicing past spending through interest on the debt rather than making investments in future generations.

Our third paper shows how the current budget process leaves programs for children at a structural disadvantage relative to programs that benefit the elderly and other adults. While much of spending on adults is mandatory, spending on children is disproportionately discretionary and thus must be reviewed and renewed with other appropriations. Spending on children is also disproportionately temporary and requires far more regular reauthorization and appropriation than programs for adults. Spending on adults is rarely limited while spending on children is often capped, constraining what can be spent for most major children's programs. In addition, most programs for children lack built-in growth, which leads to spending on children to erode relative to spending on adults and relative to the economy. Programs for children tend to lack dedicated revenue and thus lack the political advantage and protection of programs for seniors that enjoy this benefit. On top of these structural disadvantages, growing spending on adults is burdening younger generations by driving up debt and thus reducing future income and increasing costs.

With the United States undergoing a major demographic shift, the elderly will almost inevitably receive an increasing share of federal resources in the coming years and decades, and children will likely receive a declining share. However, the magnitude of this shift is not a foregone conclusion, and reforms enacted today could help put children on more equal footing. In particular, policymakers could do more to account for children, budget for children, prioritize children, and improve policies for children. This paper puts forward 12 options – developed with the assistance of experts in a variety of fields and from across the political spectrum – to assert children’s priorities in the federal budget and improve their outcomes. These options do not represent recommendations nor fully detailed proposals but rather possible starting points that are ripe for further development.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote in an op-ed for The Hill that the changing global economy requires investment in children more than ever before, but that our budget decisions do not reflect those priorities. The piece highlights the case for investing in children, as children are least able to provide for themselves of all demographic groups. It also notes that debt will likely exceed the size of the economy within a decade, which will lead to worse economic outcomes for children while also making it more difficult to invest in them.

A recent episode of the Concord Coalition’s “Facing the Future” radio show and podcast focused on how children are getting shortchanged by the budget, as detailed by CRFB senior vice president and senior policy director Marc Goldwein. While the federal government spends very little on children, it is also burdening them with substantially more debt. The podcast also discusses how interest costs crowd out spending on children and how the budget process is biased against younger generations.

By 2048, we estimate only 6.3 percent of the budget will go to children. That's less than one-third of what will be spent on Social Security, on Medicare, or on servicing the debt – implying that the federal government will spend at least six times as much on the elderly as on children. In other words, by 2048 based on CBO's and our projections, the federal government will spend more than three times as much financing past spending and tax cuts as they will investing in the future generation.

Federal spending on children will continue its expected decline, falling to roughly 7 percent of outlays and less than 2 percent of the economy by 2028, according to the 2018 report from the Kids' Share project at the Urban Institute. In 2017, the federal government spent $375 billion on children younger than 19. Along with $106 billion in tax reductions for families with children, resources for children totaled $481 billion. Spending on children made up about 2 percent of gross domestic product (GDP) and 9.4 percent of outlays in 2017.

[*]This research was funded by the Annie E. Casey Foundation. We thank them for their support but acknowledge that the findings and conclusions presented in this report are those of CRFB alone, and do not necessarily reflect the opinions of the Foundation.